Moody’s Gives Thumbs Up to Guv’s Transportation Package

I’m always preaching the need to bolster the  creditworthiness of the commonwealth — and with the fiscal calamities I see coming out of Washington, D.C., Virginia’s AAA rating just isn’t strong enough — so I feel obliged to take note of a statement issued by Moody’s Investor Services last week. The bond-rating agency has found the state’s transportation funding plan to be “credit positive.”

Stated the firm Friday:

Last Saturday, Virginia’s General Assembly passed a transportation funding package that eliminates the state’s gas tax and replaces it with a sales and use tax dedicated exclusively to funding transportation needs. Governor Bob McDonnell, who sponsored the original transportation package, is expected to sign the bill into law within the next month. The new law could generate as much as $3.5 billion of net additional revenue for roads, rail and transit in the state over the next five years, a credit positive.

The legislation makes The Commonwealth of Virginia (Aaa negative) the first state to address stagnant gas tax collections that have been increasingly insufficient to meet transportation funding needs, a problem faced by many states as they, consumers and automakers embrace higher fuel efficiency standards. These forces, combined with the fact that Virginia’s motor fuel tax rate did not adjust to inflation, have translated into flat revenues over the last ten years. … Set at a rate of 17.5 cents per gallon since 1985, over $3.3 billion of gas tax revenues have been used for required maintenance since 2002, reducing Virginia’s ability to fund transportation capacity expansion, congestion mitigation or major reconstruction and rehabilitation projects.

In a press release touting the Moody’s report, Governor Bob McDonnell gave an interesting response (my emphasis): “Today’s report from Moody’s is good news for Virginians. We are working to make Virginia a jobs-magnet and that can’t happen without a modern and well-funded transportation system.”

Bacon’s bottom line: As one who vociferously opposed the tax package, let me be quick to congratulate McDonnell on the positive review. It is a not-insignificant silver lining to an otherwise highly flawed approach to transportation policy. Unfortunately, Moody’s is interested only in the fiscal impact. The firm does not ask the question of interest to taxpayers, whether the money will be wisely spent.

On that topic, the governor’s statement should be a matter of concern. He promoted the tax increase primarily as a congestion-fighting initiative. Now he’s billing it as an economic-development initiative. Does this mean that we’ll be seeing more projects like the Charlottesville Bypass and the U.S. 460 Connector? Is he warming us up for other projects of dubious value or a highly speculative nature?

Just asking.


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4 responses to “Moody’s Gives Thumbs Up to Guv’s Transportation Package”

  1. larryg Avatar

    this is not anything shocking. Our local county gets it’s credit rating raised when we increase taxes…. sometimes we even get credit rating increases when the credit raters THINK we have sufficient wealth in the county that we COULD raise taxes.

    and you are right – the credit rating agencies are not concerned with ROI or “efficiency” just cash flow.

  2. DJRippert Avatar

    The Tea Party types in Virginia are really taking it on the chin lately. After pitching an absolute hissy fit over McDonnell’s ending of the annual transportation tax cuts that have been in place since 1986 they are dismayed to find businessmen agreeing with McDonnell.

    Moody’s does watch cash flow. And not much cash flows from businesses that leave Virginia because of the transportation funding disaster. Or businesses that don’t come to Virginia.

    Time for the Tea Party to get over this. The annual tax cuts are over. Move on.

  3. And just think what we could do if the increased tax revenues were coupled with 59.5% of the costs for transportation improvements connected with any rezoning were paid by those receiving the increased density.

  4. Breckinridge Avatar

    You call it an annual tax cut, the impact of inflation on the fixed per gallon gas tax. But I called it an annual price cut, a subtle distinction but I think an important one. Tuition at UVa is not a tax, but a price. And it sure goes up every year. Let the Tea Party chew on that one a while.

    Now the fun begins. Does Cuccinelli promise to repeal this as Governor? Or like everybody else who opposed it, if he gets in does he fume and fuss but issue press releases touting the projects and show up at the ribbon cuttings? That’s my bet.

    The Charlottesville bypass is a disaster because it is 25 years too late. It does seem silly at this point. I’m still of a mind to think the US 460 project may prove an economic boon in the long run, if it ends up being lined with distribution centers or manufacturing plants tied to the Port of Virginia. Overall the challenge will the be same as it was in the ten years after the 1986 tax package, to find the right balance of projects that actually move traffic rather than those that create more congestion. The difference between then and now is the price of fuel, which may help the decision process.

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